27 April 2010 External T.I. 2010-0358221E5 - Home Renovation Tax Credit

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Does a seniors' residence governed by a housing society qualify as an eligible dwelling under the HRTC?

Position: No

Reasons: Individual members do not own a housing unit nor do they have share of capital stock of a co-operative housing corporation.

XXXXXXXXXX 2010-035822

April 27, 2010

Dear XXXXXXXXXX :

Re: Eligibility for the Home Renovation Tax Credit

This is in reply to your submission of February 18, 2010 regarding the eligibility for the home renovation tax credit (the "HRTC"). In particular, the issue is whether the XXXXXXXXXX seniors' residence is considered an eligible dwelling for purposes of the HRTC.

Written confirmation of the tax implications inherent in particular transactions may only be provided by this Directorate where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following general comments.

Our Comments

Section 118.04 of the Income Tax Act (the "Act") provides individuals with a temporary 15% non-refundable income tax credit on qualifying home renovation expenditures made to an eligible dwelling by an individual.

Under section 118.04 of the Act, expenditures for services received or goods acquired, after January 27, 2009, and before February 1, 2010, qualify for the HRTC if they are directly attributable to a renovation or an alteration of an eligible dwelling, including land that forms part of the eligible dwelling, and if the renovation or alteration is of an enduring nature and is integral to the eligible dwelling.

An eligible dwelling is defined in subsection 118.04(1) of the Act and generally means a housing unit located in Canada that is owned by the individual or in the case of a co-operative housing unit the individual must own a share of the capital stock of a co-operative housing corporation which the individual must have acquired for the sole purpose of inhabiting that housing unit. XXXXXXXXXX members do not own a share of capital stock in a co-operative housing corporation or a similar entity and therefore, without ownership of the unit by an individual, the unit is not an eligible dwelling for purposes of the HRTC. Interpretation Bulletin IT-120R6, Principal Residence, dated July 20, 2003, further discusses housing units and co-operative housing corporations.

The Act does not define the term "owned". Based on the information provided, we understand that the XXXXXXXXXX , an unincorporated, not for profit entity operates through memberships and a governing board of directors without share capital. The XXXXXXXXXX members loan a stipulated amount to XXXXXXXXXX for a right to occupy a unit and have certain voting rights. According to the information provided, the XXXXXXXXXX 's members do not legally own their unit since they do not have registered title to the units in which they reside. Whether XXXXXXXXXX members have beneficial ownership is a question of fact that can only be made after consideration of all the facts and circumstances of your particular case. The term "beneficial ownership" is used to describe the type of ownership of a person who is entitled to the use and benefit of the property whether or not that person has concurrent legal ownership. Beneficial ownership must be distinguished from the other types of physical possession of property which a person may enjoy. Factors, other than possession, that are useful in determining whether a person has beneficial ownership in a property include the right to collect rents, the right to call for the mortgaging of the property, the right to transfer title by sale or by will, the obligation to repair, and the obligation to pay property taxes. Guidelines for determining "beneficial ownership" are explained in Interpretation Bulletin IT-437R, Ownership of Property (Principal Residence). This bulletin and IT-120R6 are available on the CRA website.

According to the information provided, it appears that the XXXXXXXXXX units in which its members reside would not constitute a housing unit under subsection 118.04(1) of the Act because the individual members do not have legal ownership and do not appear to have beneficial ownership.

Since the XXXXXXXXXX seniors' residence is not an eligible dwelling for purposes of subsection 118.04(1) of the Act, renovations to it do not qualify for the HRTC.

You can find more information on the HRTC on the Canada Revenue Agency Web site at www.cra.gc.ca/hrtc and in the Government of Canada brochure available at www.actionplan.gc.ca/grfx/docs/hrtc_eng.pdf. .
We trust our comments will be of assistance to you.
Yours truly,

Lita Krantz
Assistant Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch